How City Hall Uses Withdrawal Funds to Save Investment

When the crisis came, I realized that the city hall of Paris was in great distress. In other words, La Fontaine will make you want to write. So (a little) exaggerated, the financial situation of the city of Paris will undoubtedly enliven the next Parisian parliament, as it did in the previous parliament (February 8-11). Opposition wields $ 6.6 billion in debt in 2020, and local governments guarantee that everything is under control, which is the fault of Covid-19 and the departure of the country. Obviously, there are truths and falsehoods everywhere, but let’s take a closer look based on the report of the Regional Accounting Council.

Before moving on, it is important to understand how the budget of a municipality (€ 10.1 billion), such as the City Hall of Paris, works. Basically, on the one hand, there are operating costs (salaries, operating costs, etc.) of 8.2 billion euros and investment costs (1.9 billion euros). To raise funds for the former, the city hall collects operating income (taxes, transfer taxes, childcare fees, etc.). These are usually more than cover operating expenses, and the surplus is called cash flow or total savings. The latter is used to finance investment expenditures. In general, this is a normal situation and cannot be fully funded. Therefore, the community borrows and completes.

How do you invest when you don’t have money?

However, under the orders of Hidalgo, the Paris City Hall decided to pursue ambitious investment policies, such as the renovation of the Eiffel Tower site. A political choice that makes sense. But the problem is that the city hall in Paris doesn’t have that high total savings.The Regional Accounting Council (CRC) also said, “Comparison of total savings rates. [rapport entre épargne brute et recettes de fonctionnement] The co-authorship of Lyon and Marseille reveals the permanently weak nature of the city of Paris’ self-financing. Therefore, from 2015 to 2019, the figures in the report show that Lyon and Marseille will not fall below 10%, while Paris will not exceed 7%.

The City Hall has used two main means to fund the “Ambitious Investment Policy with Cumulative Spending of € 6,994 Million from 2015 to 2019”. Debt increased from € 4.67 billion to € 6.62 billion between 2015 and 2020. And the sale of the city’s heritage. “The city generated over € 1 billion in sales between 2015 and 2019,” the CRC identifies. “Sale of family jewelry” accused by Marie-Claire Carrere Gee, an opposition adviser to the Paris Parliament and chairman of the Finance Commission.

Not affected by property tax

However, these two solutions are not sustainable in the long run, and the Paris City Hall is trying to boost operating revenue. Also, according to Paul Simondon, deputy mayor of Paris, “the municipality is paying attention to the purchasing power of Parisians”, so they are trying to make withdrawal funds at the fixed asset tax rate (quite low in Paris) at Taboo. You may get the impression that you are there. Paris in charge of finance. But for the rest, the city will scratch as much as possible. For example, “the public agency responsible for the restoration of Notre Dame Cathedral claims royalties for occupying the public domain of € 25 million a year,” Marie Claire Curry Gee is worried. It’s a legitimate request under the law, but it has caused controversy.

It’s also a capitalized rent technique. Therefore, the CRC explains, “The city of Paris outsources housing to social landlords in Paris so that they can pay for their social housing stock.” This is done through a long-term management lease. However, the city of Paris “can require social landlords to capitalize all fees payable during the lease term with a single payment. [conclus le plus souvent pour soixante ans] “The funds collected in this way are usually allocated to investment income, but may appear in operating profit if subject to government criticism (which the city hall always obtains).” The accounting trick that allowed the city of Paris to balance its budget mentions CRC, but nevertheless, the city is “permanently deprived of funding for the future.” It is clearly stated.

“Parisian will rain”

Always seeking new income, “City Hall increases everything not listed in the tax office and blames Marie Claire Curry Gee. Creation of a new parking tax on electric motorcycles, paid on March 1st. There are now temporary occupation approvals for removal, abolition of the free zone period, extension of toll parking in the Bois de Boulogne and Wood of Vincennes. A project to reform the fees paid by merchants. Marie Claire Curry Gee concludes. “It will rain in Parisians! »»

Meanwhile, Paul Simondon promises that his financial situation is “healthy and improving.” But above all, he accuses “the withdrawal of the state that shocks receipts.” Thus, the well-known DGF (Global Management Grant) paid by the state to the city hall has collapsed (1.2 billion in 2013 to 53 million in 2020), horizontal leveling has been strengthened, and Paris is underprivileged. I was forced to give more to the town. More technically, various regional reforms have transferred some of the company’s contributions to value (CVAE, former business tax) to Greater Paris Metropolis and its regions. Of course, the Paris city hall is compensated, but fixed, but tax revenues tend to increase. “In total, the cumulative effect of reducing DGF (€ 610 million), strengthening leveling (€ 384 million), and losing revenue on the evolution of CVAE (€ 190 million) is a loss to the city. Will generate € 1.184 billion in revenue in 2020, “the CRC writes. We have a lot.

Covid is expensive and very expensive

In addition to this, there was an unavoidable health crisis, which had a double negative impact on Paris’ finances. First, the city hall incurred additional costs to combat the epidemic, and then the crisis affected revenues such as tourism taxes. “This incurs a net cost (estimated by the city of € 710 million) that contributed to the total savings deficit and increased debt (€ 5.88 billion) in 2020, reaching € 6.62 billion at the end of 2019. The euro at the end of 2020) ”, said the CRC report. And Paul Simondon pointed out the support of a weak nation. “Unlike cities like Nice and Turon, we barely mention anything from our recovery plans. With only 30 million people, we mourn the elected officials. And the nation doesn’t even keep its promises. Hmm. We spent € 50 million on the mask that the state undertook to repay up to $ 17 million, and we received only € 2 million under the pretext of distributing it to the city authorities. No. An appeal is ongoing in this case as well.

And with the 2022 budget, that’s already complicated. “Government tax exemptions are associated with lower-than-expected amounts of capitalized rent, making it difficult for municipalities to balance,” predicts Marie Claire Curry Gee. Similarly, the City Hall planned to earn € 39 million in toll parking for motorcycles, but this was postponed to September … facing these difficulties and, more generally, “Paris will be raised with the next president,” said Paul Simondon. Poll favorites promise to abolish CVAE, so it’s not in the right direction …